Economists agree that the multiplier effect on real output is close to zero when

Question

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The multiplier effect on real output is close to zero when an economy is at or near full employment because there is little room for additional production capacity or increased employment without encountering resource constraints. In other words, there is no additional capacity to support an increase in aggregate demand, so any increase will simply be met with higher prices rather than higher output.

Economists Agree That the Multiplier Effect on Real Output Is